INTRODUCTION

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Prior to the economic and fi nancial crisis (henceforth the Crisis) that gripped

Indonesia in the late 1990s the previous 30 years had seen a substantial

reduction in poverty brought about largely through rapid economic growth

rather than through special measures, that is programs and policies that

were specifi cally targeted at the poorest sections of the community. The real

gains in poverty reduction, and the accompanying signifi cant improvement

in a key range of socio-economic indicators – such as declining infant

mortality and rising school enrollments, literacy rates, nutrition and living

standards – were achieved against a backdrop of sustained economic growth

and the general improvement and expansion of public infrastructure and

community social services. Of particular importance were the provision

of basic education and health facilities through an active construction

program of schools and community health centers. Important also were

the development and expansion of roads and communication networks, a

rural electrifi cation program, and the provision of supplies of clean water.

These programs were all largely funded out of the public purse through

the national development budget (see Booth, 2000 and Hill, 1996: 198–9,

1994: 105–7).

Despite the fact that Indonesia has always been a poor country where

poverty has always been a fact of life, and although there had previously

been a number of government general development programs that provided

indirect assistance to those who were among the poorest sections of the

community, especially in rural areas, it was not until 1994 that a government

program was introduced that was specifi cally targeted to address the problems

of poverty. In that year, as part of the Sixth Five Year Development Plan

(Rencana Pembangunan Lima Tahun or REPELITA VI), the government

announced an ambitious special assistance program, known as Inpres Desa

Tertinggal (IDT), which was designed to assist all villages throughout the

country that had been identifi ed as poor. We include this initial program in

our review of the targeting of anti-poverty programs below.

If the Indonesian government had been slow to initiate programs that

were deliberately targeted at the poor, preferring general economic growth

to provide the main mechanism to lift people out of poverty, this strategy

suddenly had to be reassessed after the onset of the Crisis. It appeared

that the combined fl ow-on effects of the meltdown in the fi nancial sector

had wiped out much of the gains of the past three decades. The sudden

alarming increase in poverty made it imperative that some special assistance

measures were put in place for those who were most exposed and at risk.

As Indonesia had never developed an effective social security system that

might offer protection for the poor and the most vulnerable during a

period of sudden economic shock, there were grave fears about the social

consequences of the crisis, especially as there was a surge in the prices of

basic commodities, such as foodstuffs, during 1998 and real wages fell by

about a third (Feridhanusetyawan, 2000). The response to the Crisis was

the introduction of a package of measures under a general Social Safety

Net program and these formed the core of the poverty targeting strategy.

Prior to examining the effectiveness of these measures we fi rst survey the

data on poverty trends in Indonesia.